Foreign Currency Market Update – GBP / NZD Update
Pound Sterling (GBP) has been gradually declining this week as the New Zealand Dollar (NZD) advanced, buoyed initially by last week’s second consecutive price increase at the GlobalDairyTrade auction. The US Federal Reserve delivered the anticipated 0.25 interest rate hike. As the move was already priced into exchange rates to a certain extent the increase saw the US Dollar (USD) soften, making the high-risk ‘Kiwi’ (NZD) more appealing.
Although data for the UK was mostly positive, with unemployment falling unexpectedly to 5.2% and Employment Change posting an increase of 207k, poor US data weakened the US Dollar and allowed the ‘Kiwi’ to advance. GBP gains were also limited as domestic wage growth slowed by more than expected. Meanwhile, data for the US industrial and manufacturing sectors showed a worse-than-expected performance. Sterling recovered overnight after figures released during the Australasian session showed that New Zealand’s GDP had slowed by -0.1% year-on-year, although quarter-on-quarter (QoQ) showed an acceleration of growth to 0.9%.
After a brief decline on Thursday, GBP/NZD advanced again as Retail Sales Figures for November greatly exceeded expectations, with Black Friday and Cyber Monday helping push sales up 5.0% instead of the 3.0% forecast with a monthly sales increase of 1.7%. The shrinkage of CBI Trends Total Orders also slowed, from -11 to -7.
Sterling slumped on Friday, however, after data released for New Zealand during the Australasian session showed that business confidence was rising, with the NBNZ Business Confidence index increasing from 14.6 to 23.0. The Activity Outlook index also rose from 32.0 to 34.4, while the number of monthly job advertisements rose 2.0%. This all helped to push the New Zealand Dollar up and saw the GBP/NZD exchange rate drop from 2.2651 at the start of the week to 2.2136.
Trade has been thin so far in the week beginning December 21st, with Pound Sterling gradually declining from 2.2145 to the current six-month low against the New Zealand Dollar in the region of 2.1807. The ‘Kiwi’ rise started thanks to the Westpac NZ Consumer Confidence survey, which showed that consumer outlook continues to become more optimistic, with the survey index rising from 106.0 to 110.7.
Today’s Australasian session will see the release of New Zealand Trade Balance figures, which are expected to show that the deficit between imports and exports shrank by over NZ$150 million in November. There is no more data due out for New Zealand, while the UK has Gross Domestic Product estimates and mortgage figures which could help strengthen the currently weak Pound Sterling. The US is set to release significant data in the next few days, which could strengthen the ‘Buck’ (USD) see the ‘Kiwi’ retreating.
Heads Up
Summary of major upcoming data releases that we think may move the market.